China has barred brokers from opening offshore trading accounts for domestic investors and launched its first purchasing programme targeting top banks’ shares since 2008, as capital outflows and foreign selling weigh on the country’s markets.
The China Securities Regulatory Commission ordered Chinese brokerages and their offshore subsidiaries to “close all new account opening channels for domestic investors” seeking to invest in offshore markets, according to a notice dated September 28 seen by the Financial Times.
“Opening overseas fund accounts for domestic investors is prohibited,” the CSRC said in the note, which was first reported by Reuters. It added that brokers must stop marketing such services to investors both “at home and abroad”. The CSRC did not immediately reply to a request for comment.
The move comes as Chinese policymakers are trying to shore up confidence in the economy and financial sector after a sluggish post-Covid rebound and a prolonged liquidity crisis among property developers. China’s CSI 300 index has shed more than 5 per cent this year amid fragile investor confidence in the world’s second-largest economy.
On Wednesday, a Beijing-backed fund increased its shareholdings in China’s four biggest banks, spurring hopes for further moves to boost market sentiment.
The state-controlled Central Huijin fund invested more than Rmb477mn ($63mn) in China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China. Shares in the four lenders gained on Thursday.
The investments by Central Huijin, already the main shareholder of the four banks, were the first such purchases for eight years and helped to lift the broader market.
China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed shares was up 0.5 per cent, while the Hang Seng China Enterprises index in Hong Kong rose almost 2 per cent.
Central Huijin, established in 2003, is now a unit of the $1.4tn China Investment Corporation sovereign wealth fund and is intended to be the main shareholder for China’s state-owned financial institutions. It will continue to buy into the four state banks in the next six months, according to exchange filings by the four lenders on Wednesday.
China’s finance ministry said in August that it would halve its stamp duty on stock trades in order to “invigorate capital markets and boost investor confidence”, but the gains spurred by that move quickly faded.
The latest moves to bolster market sentiment and staunch outflows follow months of selling by foreign investors that have helped push shares lower and put pressure on the country’s currency, with the renminbi falling 5.5 per cent against the dollar this year.
Analysts at HSBC cut their year-end target for the CSI 300 by almost 5 per cent on Wednesday, saying they had “underestimated the scale” of foreign selling in August and September.
“Beijing wants to show the foreign investors who have been selling out of China stocks for months that they will support the market,” said Louis Tse, an independent analyst and expert on Chinese markets. “But I’m still worried that this won’t be enough to shift sentiment.”
Central Huijin is often seen by investors as a buyer of last resort in the Chinese stock market. Its purchases of state bank shares in 2015 came during a broad market meltdown.